Current Technology Concepts, Inc. v. Irie Enterprises, Inc.

• Decision Date: 28 April 1995
• Docket Number: No. C1-94-289,C1-94-289
• Parties: CURRENT TECHNOLOGY CONCEPTS, INC., Plaintiffs, v. IRIE ENTERPRISES, INC., d/b/a Irie Computer, et al., Defendants.
• Court: Minnesota Supreme Court

Page 539

530 N.W.2d 539

CURRENT TECHNOLOGY CONCEPTS, INC., Plaintiffs, v. IRIE ENTERPRISES, INC., d/b/a Irie Computer, et al., Defendants.

No. C1-94-289.

Supreme Court of Minnesota.

April 28, 1995.

Syllabus by the Court

1. Consideration paid for promises set forth in parties' agreement, which include defendant's promise to enter into a Reseller Agreement with plaintiff allowing plaintiff to resell defendant's software and hardware products, constitutes a franchise fee under the Minnesota Franchise Act, Minn.Stat. § 80C.01, subds. 4, 9 (1994).

2. The parties' Reseller Agreements are not excluded from the Minnesota Franchise Act's coverage under Minn.Stat. § 80C.01, subd. 4(f) (1994).

Mark J. Frenz, Margaret K. Savage, Briggs and Morgan, Minneapolis, for plaintiffs.

Robert G. Morrison, pro hac vice, Ann Arbor, MI, for defendants.

OPINION

PAGE, Justice.

This case presents certified questions from the United States District Court, District of Minnesota, which ask us to determine whether an agreement between Irie Enterprises, Inc. (Irie), a Michigan corporation, and Current Technology Concepts, Inc. (CTC), a Minnesota corporation, constitutes a franchise governed by the Minnesota Franchise Act (the Act), Minn.Stat. §§ 80C.01-.30 (1994). ¹ The claims underlying this action arose when Irie terminated an agreement between the two corporations which gave CTC the right to market Irie's computer software and hardware products. In response to Irie's termination of the agreement, CTC filed suit in the U.S. District Court, District of Minnesota, alleging, among other things, that Irie violated the Act. The court, Judge Donald Lay presiding, ² concluded as a matter of law that the Act applied to the agreement and that Irie violated the Act. A jury trial was held on the issue of damages and the jury returned a verdict of $1.3 million in CTC's favor. Irie moved for judgment as a matter of law, a new trial, or remittitur, and, as a result, Judge Lay certified, pursuant to Minn.Stat. § 480.061 (1994), four questions to this court. As we have rephrased them, ³ the questions we answer are:

1. Was the $125,000 payment required by the CA$H Agreement consideration for the Reseller Agreement such that the payment constitutes a "franchise fee" under the Act?

2. Are the parties' Reseller Agreements excluded from coverage under the Act by the exception to the Act found in Minn.Stat. § 80C.01, subd. 4(f), which provides that a franchise does not include any agreement whereby the franchisee is required to pay less than $100 on an annual basis?

We answer the first question in the affirmative. We answer the second question in the negative. We decline to answer the federal district court's certified questions as to: (a) whether the relationship between CTC and Irie, based on the overall evidence, constituted a franchise to be governed by the Minnesota Franchise Act; and (b) whether the damage award was too speculative, remote, or conjectural or excessive. Neither question presents an issue "as to which it appears * * * there is no controlling precedent" in our prior decisions. Minn.Stat. § 480.061, subd. 1 (1994); In re Medill, 119 B.R. 685 (Bankr.D.Minn.1990) (holding that certification should be confined to instances where the state supreme court has never addressed the dispositive issue or has indicated a willingness to change the substantive rule of law).

In an agreement (CA$H Agreement) dated June 22, 1989, CTC purchased from Irie a computer software program designed, for billing purposes, to track and monitor the use and distribution of a hospital's durable, reusable medical equipment. The program is called the Computerized Asset System for Hospitals (CA$H System). CTC agreed to pay Irie $125,000 for the CA$H System. As part of the consideration for the CA$H Agreement, Irie agreed to enter into a separate Reseller Agreement (Reseller Agreement) with CTC allowing CTC to resell Irie's other software and hardware products. Irie entered into this Reseller Agreement with CTC on June 22, 1989. On December 23, 1990, CTC and Irie renewed the Reseller Agreement (Renewal Agreement) for a term of 36 months. ⁴

On April 2, 1992, Irie sent CTC a letter terminating the Renewal Agreement. Irie's stated reason for terminating the Renewal Agreement was that CTC's account was delinquent. The letter provided that CTC had 30 days to cure the alleged delinquency by paying its outstanding balance to Irie. CTC believed that Irie terminated the Renewal Agreement to usurp from CTC the market that CTC created for Irie's products. In response to the termination letter, CTC filed this lawsuit on April 29, 1992. In its amended complaint, CTC alleged Irie: (1) breached the covenant of good faith implicit in the CA$H Agreement; (2) breached various warranties under the CA$H agreement; (3) breached the covenant of good faith implicit in the Renewal Agreement; (4) violated the Minnesota Franchise Act, Minn.Stat. §§ 80C.01-.30 (1994); (5) violated the Sales Representative Agreement Act, Minn.Stat. § 325E.37 (1994); (6) engaged in defamation and trade libel; and (7) engaged in tortious interference with contract. ⁵ After discovery, the court ordered the parties to file cross-motions for partial summary judgment on whether the Act applied to the parties' relationship. The court denied Irie's motion and granted CTC's, concluding that the Act applied and that Irie had violated the Act's registration and termination-notice provisions.

A jury trial was held on the issue of CTC's damages. At that trial, CTC presented the only evidence regarding damages. That evidence projected CTC's lost profits resulting from the Renewal Agreement's termination at $1,364,109. The jury returned a verdict in CTC's favor and awarded CTC $1.3 million in damages. The trial court reduced the award by the amount the jury calculated was outstanding on CTC's account with Irie, and entered judgment for CTC in the amount of $1,277,113.27. Irie's motion for judgment as a matter of law, a new trial, or remittitur resulted in the trial court's certification of the questions we now consider.

Under Minnesota law, a franchise is an agreement: (1) by which the franchisee is granted the right to offer or distribute goods using the franchisor's commercial symbol or related characteristics; (2) in which the parties have a community of interest in the marketing of goods or services; and (3) for which the franchisee pays a franchise fee. Minn.Stat. § 80C.01, subd. 4(a) (1994). Our franchise law, however, excludes from the definition of franchise any agreement "whereby the franchisee is required to pay less than $100 on an annual basis." Minn.Stat. § 80C.01, subd. 4(f) (1994).

The first certified question asks whether the $125,000 payment required by the CA$H Agreement was consideration for the Reseller Agreement such that the payment constitutes a franchise fee under the Act.

"Franchise fee" means any fee or charge that a franchisee or subfranchisor is required to pay or agrees to pay for the right to enter into a business or to continue a business under a franchise agreement, including, but not limited to, the payment either in lump sum or by installments of an initial capital investment fee, any fee or charges based upon a percentage of gross or net sales whether or not referred to as royalty fees, any payment for goods or services, or any training fees or training school fees or charges * * *.

Minn.Stat. § 80C.01, subd. 9 (1994).

Relying on paragraph 8.0 ⁶ of the CA$H Agreement, CTC argues the $125,000 it paid for the CA$H System was also consideration for the right to enter into the business of becoming a "reseller" of Irie software and hardware products and thus constituted the payment of a franchise fee under the Act. Irie argues that when read together, paragraphs 6.1 ⁷ and 8.0 of the CA$H Agreement are in conflict and, therefore, that the agreement is ambiguous as to whether the $125,000 payment constitutes consideration solely for the CA$H System or for both the CA$H System and the Reseller Agreement. Irie further argues that because CTC was responsible for drafting the agreement, any ambiguity should be construed against CTC.

The determination of whether a contract is ambiguous is a question of law. Lamb Plumbing & Heating Co. v. Kraus-Anderson, 296 N.W.2d 859, 862 (Minn.1980). In making that determination, a court must give the contract language its plain and ordinary meaning. Employers Mut. Liab. Ins. Co. v. Eagles Lodge, 282 Minn. 477, 479, 165 N.W.2d 554, 556 (1969). A contract must be interpreted in a way that gives all of its provisions meaning. Independent Sch. Dist. No. 877 v. Loberg Plumbing & Heating Co., 266 Minn. 426, 436, 123 N.W.2d 793, 799-800 (1963). A contract is ambiguous if its language is reasonably susceptible of more than one interpretation. Metro Office Parks Co. v. Control Data Corp., 295 Minn. 348, 351, 205 N.W.2d 121, 123 (1973); Lamb, 296 N.W.2d at 862. If a contract is ambiguous, it must be construed against its drafter. Lowry v. Kneeland, 263 Minn. 537, 541, 117 N.W.2d 207, 210 (1962).

We do not find paragraphs 6.1 and 8.0 of the CA$H Agreement in conflict and, therefore, we conclude that the CA$H Agreement is not ambiguous. It is well-settled that one promise may act as consideration for multiple promises. See, e.g., Restatement (Second) of Contracts § 80 cmt. a (1981) ("A single performance or return promise may thus furnish consideration for any number of promises."); Pine River State Bank v. Mettille, 333 N.W.2d 622, 629 (Minn.1983) (citing Restatement (Second) of Contracts § 80, cmt. a (1981)). Here, the $125,000 payment from CTC was consideration for the promises contained in paragraphs 6.1 and 8.0 of the CA$H Agreement. Although it is true, as Irie argues, that paragraph 6.1 indicates CTC paid the $125,000 for the CA$H System, paragraph 6.1 does not indicate the payment was exclusively for the CA$H System. To read exclusivity into paragraph...